Condition of the State 2012

Welcome to the House of Representatives chambers at the Iowa Statehouse. Members of the House and Senate convene now in joint session awaiting Governor Branstad's 2012 Condition of the State Address. Hello, I'm Dean Borg. Governor Branstad very familiar with the speeches in this chamber. He served here as a representative from Winnebago County and as Governor he has presented the Condition of the State Address sixteen times across four terms. And now entering the second year of his fifth term, Governor Branstad will be presenting initiatives he'd like legislators debating during the next 100 days or so before they adjourn for election year politicking. The Governor is setting education and property tax revisions as separate pieces of his 2012 legislative agenda. Whether teacher's unions, school administrators and legislators join him in education reform still to be determined. Despite a slow economic recovery, legislators must cover a budget shortfall in the months ahead. Some legislators are proposing raising the gas tax but Governor Branstad says this isn't the time to be increasing fuel taxes. You see the Governor now being escorted to the lectern, being greeted by Kraig Paulsen, the Speaker of the House, shaking hands, pausing just a moment before stepping to the lectern because he'll await the introduction from the President of the Iowa Senate Jack Kibbie who is about to speak. Before the Governor came in, the Governor's family, Lieutenant Governor Kim Reynolds, Justices of the Iowa Supreme Court and the Court of Appeals and the State Executive Council were all ushered in so they are here in this very crowded chamber this morning. Here is Jack Kibbie, the President of the Iowa Senate.

Kibbie: It is my pleasure to introduce the Governor for his Condition of the State message. Governor, we've probably never had weather like this on another State of the State message in history so we ought to write that on the wall. So, it is my pleasure and I'll introduce your honorable Governor Terry Branstad.

Branstad: Thank you. (applause) Madam Lieutenant Governor, Mr. President, Mr. Speaker, leaders, justices and judges, legislators, elected officials, distinguished guests, family, friends and fellow Iowans ... today it is my honor to stand before you and deliver this, my 17th State of the State address in this great chamber. And while 17 doesn't sound like such a big number to me, my wife Chris would say I just don't know when to quit talking. I stand here today older and wiser than during my first such opportunity those years ago but with a heart full of pride, a head full of ideas and with a state full of new opportunities to grow and prosper as never before. Last year we, like many other states, faced serious budget challenges and unacceptably high levels of unemployment. Eight-nine programs were funded with one-time money that was due to run out to the tune of $900 million. In other words, it amounted to nearly one-sixth of our entire general fund budget. More than 100,000 Iowans were out of work and seeking jobs and thousands more had simply given up hope. My charge to each of us was simple, yet significant -- to restore predictability and stability to our state budget, to ensure our decisions were sustainable for the long-term, to set the stage for a period of unprecedented economic expansion. Together, we too these challenges as Iowans always do. And while the process was messy, as it always is, and though none of us got everything we sought, as we never do, we took the necessary steps to put the state's fiscal house back in order, ended our dependency on one-time revenue, funded a balanced budget using ongoing revenue and passed a biennial budget that funds most areas for two years. (applause)

Here in Iowa, we're a model for the nation of how republicans and democrats can work together for the common good of our people. Iowans deserve a budget that works, a budget that focuses on the essentials, a budget that reflects the character and the ideals of Iowa's hard-working taxpayers and together we delivered just that. So take this moment, before the hard work of this session begins, and congratulate your fellow legislators for a job well done as I congratulate each of you. (applause)

Now, with our fiscal house much improved, our fiscal year 2013 budget already substantially completed we have a tremendous opportunity to focus the next few months on two critical priorities. First, creating new jobs and careers for Iowans to significantly raise family incomes. And second, adopting common sense solutions for our schools to give our children a world class education. We must share the urgency of Iowans to revitalize our economy and improve our schools. We must commit long-term to make Iowa ready to support the jobs and careers of the future -- the very careers that will keep Iowans home and bring new economic opportunities to our state. This past year we took the first steps towards improving Iowa's economic health. Together we created the Iowa Partnership for Economic Progress which will lead our state's efforts to encourage entrepreneurs and small businesses. In addition, I signed an executive order that requires a jobs impact statement on any proposed administrative rule. These are just the first steps on our path towards renewed prosperity that brings greater opportunity to all Iowans. While improvement is being made, there is still much work to be done and it is going to take the cooperation of every member in this chamber to provide the opportunities that Iowans deserve. The "all or nothing" politics that often prevents the leaders from making progress on many important issues in Washington, D.C. and in other state capitols does not have to happen here. In Iowa, we have a shared responsibility to do our work differently, to work in the best interests of all Iowans and to shed the partisanship that makes good policy so elusive.

The simple truth is Iowa no longer competes against other states to attract new jobs, careers and economic development and investment. We now compete in a worldwide economy. We must compete with Brazilian ethanol, with Chinese production of technology and with every other emerging nation ready to claim or economic mantle. I have seen first-hand the economic and educational growth around the world. This past September I traveled to Korea, China and Japan as part of a trade and investment mission. While in Beijing, I met with Vice President Xi Jinping. Vice President Xi actually visited Iowa in April of 1985 as a Hebei Province party official. He is now the Vice President and later this year he'll become the President of China. Out of that meeting one thing was very clear -- for Iowa to compete in the future, we must compete globally. On that trip, I met with companies in each country that I visited. I was able to communicate a message that Iowa is open for business and posited for growth, a message that Iowa is full of hard-working citizens who are ready to work. As a result of those efforts, we convinced the South Korean company CJ to invest $324 million in the Fort Dodge area and bring 180 great jobs to Iowa. (applause)

However, companies abroad should not be the sole source of our growth. American companies have seen the work that we have done collectively to enhance stability in our state through our fiscal discipline. As a result, numerous companies have announced their relocation or expansion plans in Iowa. Cargill purchased the Tate and Lyle plant in Fort Dodge and will create over 100 new jobs in Webster County and provide another market for Iowa corn. ALCOA is investing nearly $300 million in their Davenport factory where they will begin producing automotive aluminum to meet the rising demand for lighter and more fuel efficient vehicles. The combination of our strong agricultural, bio-science, manufacturing and financial sectors means Iowa is better positioned that most states for economic expansion. (applause)

But I believe being better is not good enough. We must strive to be the best. I'm convinced that Iowa stands at the precipice of major economic expansion but that expansion is not guaranteed. Our opportunity for unparalleled growth is like the opportunity that a good Iowa field affords a farmer, but work must be done before a harvest can be reaped. Our job creators are ready. The question is, are we? Are we ready to plant the seeds for growth and prosperity? If the answer is yes, and the answer must be yes, then we must develop the permanent job, the permanent tools that job creators, career builders and hard-working Iowans so critically need. And that is why today I am proposing a four point plan of action, a focused initiative designed to help create the jobs we need today and the careers that we need tomorrow. (applause)

The first piece of my action plan should be of no surprise to anyone. This year I will submit to the General Assembly a revised plan to reduce commercial and industrial property taxes by 40% over the next eight years. Commercial property taxes in Iowa are the second highest in the nation and I believe there is an agreement within this chamber that these taxes must be reduced, not because they cause businesses too much money, but because they cost Iowans jobs. (applause)

What has been lacking in this discussion, I believe, is an understanding of the consequences for small business owners who struggle to keep their doors open and their workers employed due to this backbreaking business burden. Today, sitting with my family, is Ying Sa. I met Ying at the Iowa Immigrant Entrepreneurial Summit. She is a leader who has helped hundreds of immigrant entrepreneurs start successful businesses in Iowa including her own. Ying and nearly 500 other Iowans met to discuss their experience starting businesses and their dreams for success here in Iowa. I was honored to address their summit and to recognize 125 immigrant entrepreneurs who started a new business in just last year here in the state of Iowa. Ying, thank you. (applause)

Ying is a relatively new American citizen. Ying has a growing CPA business but she does not own her own office space. Rather, she leases the property and she, like thousands of other small business owners across Iowa, feels the brunt of our high property taxes through the net-net leases wherein she pays the full cost of the property taxes attributable to her footprint. Ying, we're proud of you and you represent thousands of other hopeful small business owners, Iowans who are in most need of commercial property tax relief, these start-up small businesses. (applause)

Will each of you commit to permanent property tax relief solution for Ying and for all of her fellow small business owners and the tens of thousands of Iowans seeking jobs? (applause)

Passing our plan will give Iowa business owners permanent relief and a fighting chance to compete. In addition, our plan prevents a shift to other classes of property by limiting local government spending and by cutting in half the annual growth limit for residential and agricultural property. The second piece of my action plan is to give our Iowa Economic Development Authority the tools it needs to create our job, to help lead our job creation efforts. Last year the legislature directed us to create a replacement for the Grow Iowa Values Fund and we are proposing a new $25 million annual investment in our High Quality Jobs Program. The High Quality Jobs Program has a proven record of success and a documented return on investment of two dollars in new tax revenue for every one dollar invested. This direct assistance component gives the Iowa Partnership for Economic Progress an important tool in attracting high quality businesses and careers to Iowa. In addition, my proposal will be structured so that the state investments in this program will decline over time and so the program will be self-funding within ten years as a direct result of the jobs that it brings to Iowa.

The third component of my jobs and careers action plan will encourage those small businesses that supply key components to our strong manufacturing sector to grow their facilities and create new jobs in Iowa. Often, major manufacturers have large supply chains filled with companies that produce vital components for the anchor manufacturer. Manufacturing must remain an important part of our diversified Iowa economy. I will offer legislation that removes the barriers that discourage suppliers from bringing their businesses closer to their best Iowa customers. We have major anchor manufacturers like John Deere in Waterloo. Lt's develop a supply chain cluster wherein surrounding towns attract those smaller support businesses that feed John Deere. Without question, the jobs that such suppliers will bring to places like Hudson, LaPorte City, Parkersburg and Denver are equally important to those communities as the jobs that John Deere provides to the citizens of Waterloo.

The final piece of this jobs and careers puzzle involves the dilemma faced by many Iowa rural communities when a local anchor business is put up for sale. When hometown businesses are sold to out-of-town, out-of-state or out-of-country buyers, the local community often suffers. We must work to keep Iowa companies in Iowa, even when the ownership -- even when an ownership change takes place. This is not just a tool for Iowa businesses, it is a tool for Iowa communities, Iowa communities where these companies represent so much more than jobs, where these companies represent our families, friends and our way of life. Many of these companies have operated in Iowa for years, operated by owners committed to the local way of life and when those owners wish to retire, they must have options to keep their companies local. I am proposing legislation that will encourage the formation of Employee Stock Option Plans to encourage the sale of these local businesses to the very employees who have made the company a profitable success. (applause)

Our plan will encourage more Iowans to own a stake in their company, to reap a greater share of the fruits of their own labor, and to help protect the quality of life in their community. Employee ownership is great for the Iowa communities in which these businesses, jobs and careers exist. My four point action plan to create jobs, with that we need today, it will help us create the jobs we need today and the careers that we need tomorrow and it is essential that we have your bipartisan support to get this done. (applause)

But we can't leave any discussion about Iowa's future without focusing on our most precious natural resource, our children. With four young granddaughters, I understand the importance of commitment, a commitment at this time when new technology and other forces are rapidly reshaping the labor market. Our children's future depends on whether they learn the knowledge, life skills needed to succeed in a global economy and be well-informed, good citizens of the 21st century. Our state's future depends on whether the quality of our schools matches the best performing schools anywhere in the world. Today we have with us in the gallery students from Van Meter, Ankeny and Capitol View Elementary here in Des Moines. I asked them to be here because today we take a crucial step towards ensuring that they have opportunities to pursue their dreams by being among the best educated anywhere in the world. (applause)

Thank you, students. (applause) The bottom line is education must be a greater priority in our state because if our schools are not the best then we will fail our young people and those young Iowans who follow them. Last week, Lieutenant Governor Kim Reynolds and I unveiled our updated education reform blueprint. It is a product of nearly a year of hard work. That work included an education summit that brought together the best minds from Iowa, the nation and the world. Then it was followed by a release of the initial blueprint to start a statewide conversation on how to give our kids the best education. At that point, we hit the road to hold an unprecedented number of education town halls to engage students, parents, teachers, job seekers and other Iowans in a true give-and-take dialogue about the future of Iowa's education system with the final step of revising the blueprint into the actual reforms that are before you now.

Here are some of the steps we need to take together to turn Iowa's good schools into world-class schools. One, we need a great teacher in every classroom and a great principal in every building and that starts by being more selective in who becomes an educator. A "B" college grade-point average for admission to Iowa's teacher preparation programs is not asking too much. Two, all prospective teachers seeking a state license should demonstrate content and teaching mastery to assure they are ready for the crucial work of teaching our children. Three, the School Administration Manager program should be changed to provide more time for principals to be instructional leaders. Other staff can take on some of the management tasks to free principals to observe and coach teachers in their classrooms. Four, the Iowa Department of Education will continue to improve the Iowa Core -- our state standards for math, science, English and social studies. But well-rounded, healthy students need more than just these core areas. The department will work with educators to develop new standards for music and other fine arts, character education, physical education, entrepreneurship education, applied arts and foreign languages. Five, new kindergarten assessments will assure that students start kindergarten ready to learn and leave prepared to flourish in first grade. Six, end-of-course tests in core subjects will demonstrate that high school students are ready to graduate. These will be designed with teachers and will emphasize not just content but being able to apply it. Seven, all juniors should take a college entrance exam and the state will cover the cost. In addition, we should have the option, they should have the option of taking a work skills readiness test. This will tell us whether Iowa students are college and career ready for life after high school. Eight, let's assure that children can ready by the end of third grade. Otherwise, they will fall further and further behind. An intensive focus on literacy means working closely with families and providing more support for reading and writing in schools starting in preschool, continuing through kindergarten, first, second and third grade. Because reading is so essential for later success in school, it is just unfair to promote an illiterate child. (applause)

Nine, Iowa has some highly innovative schools and we should encourage more schools to be innovative. Youngsters need more opportunities to engage in real-life experiences including internships in science, technology, engineering and mathematics. Doing well in these subjects is the gateway to fast growing fields with some of the best paying jobs whether students are headed for career training or a two or four year college. To encourage such efforts, Iowa should establish an Innovation Acceleration Fund. Schools and partners will identify education problems and innovative solutions. Competitive grants will fund the best ideas which can then be scaled up statewide. Ten, online learning that compliments learning in the traditional classroom should be promoted. So should competency-based learning that personalizes education for each child and begins the process of moving away from the time-based industrial model for education. Let's do all of this and more for our children with a bipartisan consensus that will stand the test of time. (applause)

Don't Iowa students deserve a world-class education? We have a decade of hard work ahead of us so let's get to work because this is not about this administration or the next or the one after that. It is about our children's future and our state's prosperity and growth. Let's work together on a bipartisan basis to put in place common sense solutions that are sustainable by adapting best practices that work and by innovating to find new approaches that fit Iowa. Let's work together to continuously improve because that is what the highest performing school systems do to give their children a world-class education. Let's work together to continuously improve because Iowans will hold us accountable. The solutions I have outlined today are about the future. They are about ensuring the American Dream and the Iowa way of life will be passed on to our children. Imagine filling Iowa's Main Streets with thriving businesses and busy restaurants and happy customers. Imagine creating the kind of long-term careers that keep young Iowans home and attract those who left to come back to their roots. Imagine schools among the best in the world providing our children and grandchildren with endless opportunities to pursue their dreams. These are not empty aspirations, rather, they are part of a grand vision for restoring a healthy Iowa. As the Lieutenant Governor and I traveled to all 99 counties last year, one thing was absolutely clear to us -- Iowa must strive to be the best. Whether in other parts -- where in other parts of the nation uncertainty has become a new reality it is imperative that we make Iowa the center for stability and innovation. (applause)

And let us never forget as we work together for these goals, Iowans are going to hold us accountable. We have an obligation to exceed their expectations, to begin building on our foundation for growth. I believe our aspirations for a better tomorrow can and will ignite our capacity to innovate. So, let's be innovative today. Let's provide the permanent tools that our small businesses and hard-working taxpayers so critically need. Let's commit to new jobs and career opportunities for all Iowans. Let's give our children the best education in the world. Let us, republicans and democrats, rural and urban, all Iowans become a beacon of hope for the rest of the nation and show them how a motivated people, working together with the best interests of our children in our hearts and a set of new tools in our hands can solve our common problems and bring Iowa unprecedented economic expansion, unparalleled economic and education opportunities. That is our challenge. That is our mission. That is our obligation. Thank you. God bless you and God bless the great state of Iowa. (applause)

Kibbie: Will the committee come forward and escort Governor Branstad from the House chamber. (applause)

Borg: The Governor, now posing in front of a rostrum, shaking hands with people from the Iowa Executive Council, giving a hug to Lieutenant Governor Kim Reynolds as he left the rostrum and walking to the rear of the chamber. You heard the committee that Senate President Jack Kibbie referred to, that committee escorted the Governor up from his office on the floor just below this legislative Senate and House chamber floor and now they'll escort him back to his office. I find it interesting among the people who are doing the escort, Senator Wilhelm from Howard, Kapucian from Benton County, Hanusa from Pottawattamie, Windschitl from Harrison and Wittneben from Emmet. Also included there is Liz Mathis, the Senator from Linn County just in her second day here in the Iowa legislature and she is on the committee escorting the Governor to the legislative chamber and then back to his office again. Joining me right now is the democratic majority leader in the Iowa Senate Mike Gronstal. Senator Gronstal, welcome.

Gronstal: Happy to be here, Dean.

Borg: Now, he said it was his 17th speech here at the Condition of the State. You've heard just about that many.

Gronstal: I think I've heard every one of them, yes.

Borg: How did you rate this one?

Gronstal: I think it was a very good speech and the Governor has got the right priorities about putting Iowans back to work and he's got the right priorities in terms of making sure every kid has real educational opportunities. We're going to work with this Governor on his agenda because it's the same agenda we have. So, I think it was a good speech and I think there's great opportunity to work across party lines. There are pieces with this we won't agree with and there are pieces of our stuff he won't agree with. It is important for us to look for ways to work together.

Borg: What I'm hearing from you is I think a lot different from what I heard maybe a year ago. And let me just say, maybe I've had too many football bowl games recently but I compare that to a pre-bowl game speech, it was like a pep talk more than anything else and I think that you've kind of caught up the energy.

Gronstal: Well, I think we've sensed the same things from Iowans, that they want us to set aside partisan differences and tackle some of these problems. Education clearly is a challenge in this state and in a lot of ways this state is in a good position. We have a full treasury. So, we're kind of looking forward to making some progress and I think there are pieces of what he talked about a year ago there were people saying abolish the core curriculum, today the Governor was saying it's a good thing to have a core curriculum and focus on what kids need to know for the jobs or tomorrow and he has added to that rather than talking about abolishing it. So, I think that is positive.

Borg: I wouldn't be doing my job if I didn't feel out what you said there are some points that you might disagree with.

Gronstal: We think that it sends a bad message to have no recommendation on allowable growth for fiscal 2014. The law says we'll establish allowable growth for 2014 school year ...

Borg: That is the funding that schools receive, yes. You want it to be increased although it has been set now for two years.

Gronstal: That is correct. And as you know the year we're in is zero allowable growth so schools saw no new money and I've talked with lots of teachers and that has put real pressure on local school districts in this state, losing teacher aid, more crowded classrooms, all of those kinds of things. So, I think that -- if we're talking about improving education in this state but we're saying we're going to try to do it on the cheap I think that sends kind of a mixed message to folks out there in the education world.

Borg: But you're talking about allowable growth and the Governor is already saying it's going to take $25 million to implement these new education reforms of which ...

Gronstal: Dean, I gently say it isn't really $25 million because he redirects a lot of that, it would be $17 million in new money and that is positive. But if at the same time what would traditionally be in the neighborhood of $100 million in terms of money for local school districts to figure out what they're going to do it's kind of simply also hand you $17 million here, take away $100 million over here. That's not a great message. But I don't want to dwell on that. I think people of good faith can sit down and really try and focus -- his focus on making sure that kids can read by the end of third grade I think that's a goal we all share and the idea of testing in particular if the purpose of the testing is to establish which kids are lacking and need some extra help to get those basic reading skills, that is a great idea. We're letting kids fall through the cracks -- and let's be clear -- too many kids do fall through the cracks now and don't end up coming out of third grade able to read.

Borg: And so the Governor said, I think his phrase was, we can't promote illiterate children.

Gronstal: And that's the -- that is the messy piece of it is holding -- what do you do with a kid that is brilliant at math but their reading skills are lacking? Well, obviously you need to get their reading skills up but maybe holding them back another year really damages their ability to become really great at math. So, I think we'll struggle through that. I think those decisions have to be a decision between the parents, the kid, the teachers and the school district. But let's not dwell on where we disagree, let's dwell on where we agree and we agree assessing kids' reading ability from preschool, really from even before preschool making sure parents are children's first and best teachers all the way through the school system, assessing what is lacking, I think that makes a lot of sense.

Borg: Let's turn just briefly to commercial property tax reduction. He is proposing a 40% reduction. You passed in the Iowa democratically controlled Senate last year a commercial property tax revision, the House passed one but you couldn't get together and agree. What might happen now? Are we going to discard what is already pending and work on something new?

Gronstal: I would say our concern was, is about a tax shift, cutting taxes for one group by raising taxes on another group isn't much of a solution in our view so we have talked about that. Our plan also really targeted the benefit most to small and medium size business, the example that he used today of the woman with the CPA firm, four out of five Iowa businesses, including her, would do better with the plan we passed than under the plan he proposed. So, we're going to try and work through those things and I think there's a great opportunity to do that.

Borg: You went to the very last day of the fiscal year, the last day of June before you adjourned last session. Is it going to be as contentious -- I don't see that mood here right now but you've got a lot to do in 100 days.

Gronstal: I certainly think it won't be and I don't see any sign that it will be as contentious as last time. Right as we're talking the Governor's budget books are being distributed. Our battle last year was a battle about providing money for K-12 education, providing money for Regents institutions and providing money for community colleges. Our battle, it took us a long time to get through the last legislative session but pretty much every minute of it was dedicated to making sure we had the kind of education system built to produce the workers for today's jobs. And so I didn't like going to the end of the fiscal year but I think the battle was worth having because I think we, I think if you ask people at the community colleges and the Regents institutions in this state, I think if you ask local K-12 education about next year's, next fall they actually will get some new money as opposed to zero new money this year. I think it was a battle worth fighting. We'll see when we see the Governor's budget numbers. I do think we're probably a little disappointed that there's no recommendation for allowable growth for 2014 and no recommendation means zero.

Borg: Thank you, Senator Gronstal.

Gronstal: Sure, happy to be here.

Borg: We'll have statehouse reporters joining us in a few moments to discuss the Governor's speech and the upcoming legislative session. But first, we'll look back at what Governor Branstad has said is a centerpiece of his 2012 agenda.

Branstad: Let's work together on a bipartisan basis to put in place common sense solutions that are sustainable by adapting best practices that work and by innovating to find new approaches that fit Iowa. Let's work together to continuously improve because that is what the highest performing school systems do to give their children a world-class education. Let's work together to continuously improve because Iowans will hold us accountable. The solutions I have outlined today are about the future. They are about ensuring the American Dream and the Iowa way of life will be passed on to our children.

Borg: We're seeking some reaction now from veteran statehouse reporters -- Kay Henderson is the News Director of Radio Iowa and a regular on our Iowa Press panel ... Mike Glover, Political Writer for the Associated Press, another Iowa Press regular ... and an occasional guest on Iowa Press James Q. Lynch who is a Political Writer for the Gazette published in Cedar Rapids. Kay, education. We just heard Governor Branstad saying that is the centerpiece. I could say the entire speech was economic development because education is long range economic development but there's a lot of passion in education and that could make this very controversial.

Henderson: Well, I think actually the Governor has removed the most controversial parts, the part that dealt with dramatic changes to teacher pay and the structure of advancing in that profession. So, what he unveiled here today, and which he really laid out last Friday for legislators so there were no surprises here in terms of his education platform, was actually the most doable part of what he had envisioned back in October.

Glover: What he's proposing, Dean, is he wants tougher standards for both would-be teachers before the enter teaching preparation programs and he wants more testing for students and I think there's a broad consensus in this chamber and in the Senate chamber that they'd like to do something along those lines. However, you're exactly right, education, schools, children excites passion in Iowans. This is not the last word we're going to hear about education this year. A lot of these people in this room have their own ideas about what ought to be done about education. They'll add and tinker with what he has proposed.

Borg: And Jim, that could get contentious though even though we agree that this is a passion of Iowans for education. There could be some sticking points.

Lynch: Oh, I think clearly there are. I have talked to a number of legislators who have said that they agree sort of with the big picture of what the Governor is proposing in education but there are some points they're going to fight over. One of them is the end of social promotion at the third grade level if students aren't reading at that grade level. There are studies that suggest that is not a successful strategy. So, yeah, there will be things that they'll fight about. The devil is in the details.

Borg: And part of the details is just plain paying for it, Mike.

Glover: That's absolutely right. The Governor initially came up, as Kay mentioned, with his big increase in teacher pay, he has backed away from that. But there would be a cost in implementing these things. There's going to be new assessments for teachers, we're going to measure teachers differently, we're going to look at them more hard, take a closer look at their performance in the classroom. All that could be very controversial because you're talking about now judging teacher performance in the classroom as well as judging student performance in the classroom.

Lynch: And one of those sticking points probably will be that he's proposing to take $8 million from existing funding, some for class size reductions, which is a priority for many legislators and also for professional development which probably will be a priority for teachers and administrators.

Henderson: But back to the beginning point, I think what is remarkable about this is that no democrat said this is DOA. They want to do something on education reform, both political parties, because they want to go to voters in November and say, this is what we accomplished.

Glover: And one thing I've heard already in just a few minutes after the speech is there's $25 million in new money going into education this year and a lot of democrats that I've heard this morning say that's not enough, you can not overhaul Iowa's education system with $17 million in new money and $8 million in changed money, total of $25 million.

Lynch: And one thing we didn't hear, generally when we talk about improving Iowa's schools we talk about fewer schools and consolidation or some other arrangement that would result in fewer schools. No mention of that so we're not touching that hot button.

Borg: You know, there was a phrase in that speech that I think we're going to hear again and that is, you mentioned Jim, the controversy over whether or not children in the third grade should be promoted or not if they can't read. Remember the line where Governor Branstad said he is not in favor of promoting illiterate children. That word illiterate is going to, I think, have some staying power.

Henderson: Well, I just talked to Senator Gronstal before I sat down here and he agrees that if a child can't read there must be some sort of intervention in the early grades to help them read by the time they leave third grade. So, the idea of helping children learn how to read by the time they leave third grade is not the controversy, the controversy is making that child stay back in third grade for an entire year until they are proficient in reading.

Borg: And then, as I said, the speech was entirely, you agree, that education is economic development long range but there was more immediate in the proposal to reduce corporate and industrial property taxes. Let's take a look at what the Governor said on that.

Branstad: This year I will submit to the General Assembly a revised plan to reduce commercial and industrial property taxes by 40% over the next eight years. Commercial property taxes in Iowa are the second highest in the nation and I believe there is an agreement within this chamber that these taxes must be reduced, not because they cost businesses too much money, but because they cost Iowans jobs. (applause)

Branstad: What has been lacking in this discussion, I believe, is an understanding of the consequences for small business owners who struggle to keep their doors open and their workers employed due to this backbreaking business burden.

Borg: Mike, we already said that there is a budget shortfall. Here is the Governor proposing a 40% reduction in commercial and industrial property tax. Iowans might be forgiven if they wonder what's going on.

Glover: There's a budget shortfall and the Governor is calling for a big increase in state spending. It is an eight year program to reduce commercial property taxes by 40%. He is funding the first three years, $50 million the first year, $100 million the second year, $150 million the third year. After that it gets a little bit more fuzzy where he's saying, well, I think what will happen is commercial development will start to pick up, local governments will start to get increased tax revenue and if that doesn't happen then we'll deal with that down the road. So, he's really only guaranteeing it for the first three years. But, yes, it is a very big investment of state money to replace local property tax money, a great many local officials are very nervous about what could be a big hole in their budget so they'll look very closely at this and watch it very closely as it moves forward.

Borg: How, Jim, are local property tax leverers now, that is municipalities, schools, how are they going to be protected?

Lynch: Well, the Governor is proposing to backfill, this $50 million to backfill the loss as they see it in property taxes and there's also a trigger after three years that if revenues don't go up by 4% a year then they would suspend the next phase of the reduction in property tax reduction. So, there are some protections. I thought it was very telling this morning in the briefing before the Governor spoke that his chief of staff talked about they had worked with local government organizations and he said, I'm not saying they're on board, which I thought said everything.

Glover: Which means they're not at all on board. They are very nervous about this. They have heard the Governor's assurance that we'll hold you harmless, we'll protect you. They have heard that before and they have seen the state not deliver before. So, there's a lot of nervousness out there.

Henderson: I mean, Governor Vilsack appointed a blue ribbon commission which couldn't resolve this problem, Governor Culver had a commission which tried to resolve this problem, they tried for six months to resolve this problem last year. I'm going to believe a deal if I see it. I'm really doubtful that these two political parties can bridge this divide and come up with a property tax plan because what democrats are proposing in the Senate and what House republicans and Terry Branstad are advancing are so diametrically opposed to one another that I don't know how you bridge, come up with something in the middle.

Borg: And yet ... Jim go ahead.

Lynch: I was going to say, I don't think commercial property taxes generates the same sort of passion as an education debate. But I think this might be much harder to bridge the differences on property tax relief. As Kay said, it has taken many forms over the years and there hasn't been success and this year is another, you know, could be banging their head on the wall again.

Borg: Well, banging your head on the wall -- I was taken by a conversation that I had just after the speech with Senator Gronstal in which he took pains not to criticize the speech. He said he didn't want to be negative. That is an entirely different mood. In fact, do you see, Mike, a different mood coming into this session that could make a shorter session? We had almost a record long session last year.

Glover: It's going to be a shorter session this year. There's a mood of we didn't like what happened last year with the six month long session, this is an election year, a lot of people eager to go back home and campaign. A lot of the budget for the current year is already approved so there's less for them to do and there's a lot of political imperatives to get out there and do it.

Henderson: One of the things that struck me about this speech was this was not Terry Branstad partisan republican banging his fist on the lectern telling people what to do. This was Terry Branstad the deal-maker. He wants a deal on education reform, he wants a deal on property tax reform and some of these other things so by thumbing his nose or throwing his fist in the air at democrats that's not going to achieve that and I think the most interesting line in this speech was Terry Branstad talking about the dysfunction in Washington, D.C. and how things have to be different here and I think you're hearing that from both democrats and republicans in the legislature. They realize that last year was a black eye on the institution and they want to proceed differently in 2012.

Borg: Speaking of last year, that was the third longest session in Iowa legislative history.

Glover: We remember, Dean.

Borg: In 2008, as you see on the screen there now, 103 days, in 2009 the same length, 2010 they went 79 days but then look at last year which was the first session of the, or the first session, yes, of this current General Assembly and they went the third longest in history. Mike, you're already saying not this year.

Glover: Not this year, it's an election year, they want to get back home to do some campaigning. Like I said, the budget for the current year is approved, about 85% of the budget for the next year is approved. Big items like Medicaid, those things are already approved. They won't have to have those fights and I think Kay's right, I think they learned from last year, they don't want to do that again.

Borg: A major thing, though, mental health wasn't even, as I remember in the Governor's speech today, wasn't even mentioned and yet in the minute that we have left here in this conversation that, Jim, is a major change in the way Iowa provides mental health services.

Lynch: It is and I think we'll see some sort of an agreement this year. They have sunsetted the existing program so their back is against the wall in terms of they have to do something and that is an area where there is bipartisan agreement to make some changes. But I heard Chuck Palmer from DHS yesterday talk about this is another thing that is not a one and done, it's not going to all happen this year. It's going to be the first step this year and then a multi-year process of change.

Borg: And what they're proposing to do, Kay, is that right now counties are providing mental health services, the state will take that all over and take the burden off the counties?

Henderson: Correct and it is in some forms property tax relief because when counties cover the cost of providing services to the mentally ill that comes from county property taxpayers. And so in some ways this is property tax relief but the goal, the ultimate goal everyone says is to ensure service is equal so that people who live in rural Iowa have the same kind of access that people in Des Moines do.

Borg: Thank you very much, Jim, Mike and Kay for your insights. Well, we don't know where this session is going to be headed but you can watch the Governor's speech in its entirety online at www.iptv.org and you can tune into Iowa Public Television for a weekly insight in analysis on where the session is going. You can see it on Iowa Press Fridays at 7:30 and Sundays at Noon on Iowa Public Television. So, for the entire Iowa Public Television crew, I'm Dean Borg at the Iowa Statehouse in Des Moines.

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